Wyeth to Pay $785M to End Medicaid False Claims Cases

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By Dana A. Elfin

Feb. 16 — Pfizer Inc.'s subsidiary Wyeth will pay $785 million to settle claims that Wyeth’s methods for calculating Medicaid rebates for its heartburn drug Protonix (pantoprazole sodium) violated the False Claims Act, Pfizer said Feb. 16.

In connection with the settlement announcement, Judge Douglas J. Woodlock of the U.S. District Court for the District of Massachusetts entered an order dismissing the litigation Feb. 16.

Pfizer said the settlement will fully resolve cases pending in the federal court in Boston over Wyeth's allegedly fraudulent reporting of prices for oral and intravenous versions of Protonix.

Wyeth didn't admit any liability under the settlement for the conduct, which took place between 2001 and 2006, prior to Pfizer's 2009 acquisition of Wyeth.

“We are pleased to have reached an agreement in principle to resolve these cases, which involve historic conduct that occurred at least 10 years ago, before Pfizer acquired Wyeth,” Doug Lankler, Pfizer's executive vice president and general counsel, said in a Feb. 16 statement. “The resolution of these cases reflects a desire by the Company to put these cases behind us and to focus on the needs of patients.”

First Whistle-Blower Suit Filed in 2003

The litigation over Wyeth's alleged failure to sell the Protonix products to Medicaid at the lowest price dates back to 2003 when the first of two whistle-blower suits was filed in the District of Massachusetts. A second whistle-blower suit was filed against Wyeth in 2006 in the same court, also over Wyeth's alleged overcharging the federal Medicaid program for Protonix.

The suits alleged that Wyeth offered steep discounts to thousands of hospitals to purchase a bundled package of oral and intravenous versions of the drug, but failed to provide the same discounts to the Medicaid program, as required by law.

Wyeth “undermined the fundamental objective” of the Medicaid drug rebate program by using bundled hospital discounts as a marketing tool to increase retail sales of Protonix Oral, which Medicaid and other insurers then covered at much higher prices, the government's complaint alleged.

In 2009, the federal government and more than a dozen individual states joined in the suits. The government filed its own complaint against Wyeth, alleging violations of the False Claims Act as well as common law fraud, unjust enrichment and disgorgement .

In 2010, an additional 17 states joined the suits.

Under the Medicaid drug rebate program, manufacturers of brand-name drugs are required to report to the government the prices they charge their customers, including the best price offered for their drugs. The companies also are required to pay rebates to the state Medicaid programs that are calculated on any discounted prices that are offered.

The government's complaint alleged that Wyeth knew that bundled and contingent nominal prices couldn't be excluded from its best price reports to Medicaid, yet “deliberately ignored and recklessly disregarded” the definition of bundled sales in its rebate agreement with the government and in its own policy manual.

The government had sought three times the amount of the loss sustained by Medicaid for each of the false claims counts, an amount equivalent to the loss for each of the other counts, plus penalties and interest.

To contact the reporter on this story: Dana A. Elfin in Washington at delfin@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com